Pay in low-COL satellite offices of big companies isn’t massively different from pay in Silicon Valley (averages are more different as more senior people will be in the main office) so it isn’t obvious to me that pay far away from the office should be massively lower. One argument for this to be the case is that an employee could reasonably threaten to move to Silicon Valley for higher pay (at another company.)
Obviously there is a larger supply of workers in a time zone than a metro area, but there is a larger demand for them too. And a workers can reasonably threaten to move to the part of the US where they would be paid the most.
> Pay in low-COL satellite offices of big companies isn’t massively different from pay in Silicon Valley (averages are more different as more senior people will be in the main office)
Software engineer pay is quite different, between, say, London and Paris, or between Switzerland and any place in Europe... And it has more to do with talent competition than cost of living. France or Germany aren't inexpensive places to live in but there isn't as much software talent competition, so pay is still lower there from what I can tell.
You're right that a bigger pool doesn't necessarily mean more competition or lower wages, just a trend towards equalization: some people's pay could move up from access to a pool with higher competition for talent. But the pay for the people whose location puts them already at the top of the pay ladder has only one way to go relative to others who will WFH in the same timezone.
I bet it's harder to staff a janitor job in Switzerland than in France, with unemployment rate being so much higher in the latter country... Might that explain the difference as well?
I guess what I'm saying is that businesses as a whole tend to hire people at the lowest possible costs given to them by the job market, not based on what they want the worker's disposable income to be after costs are deducted.
Costs of living do affect the offer side of the market - the willingness of people to take various jobs at various salaries.
What I'm observing in software engineering is places with smaller differences in cost of living than in pay levels, which I'd attribute to talent competition...
Obviously there is a larger supply of workers in a time zone than a metro area, but there is a larger demand for them too. And a workers can reasonably threaten to move to the part of the US where they would be paid the most.